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Chancellor Friedrich Merz is “delusional” in his expectation that Germany’s automobile trade can be spared from US tariffs, based on EU officers concerned in commerce talks with the Trump administration.
Merz has been urgent the European Fee, which manages commerce coverage on behalf of the EU’s 27 member states, to signal a “framework” cope with Washington aping the US-UK settlement signed earlier this month, which included a particular dispensation for vehicles.
However Brussels officers have privately instructed Berlin that such an association wouldn’t be potential, as decreasing German automobile imports is a giant focus for US President Donald Trump, two folks briefed on the discussions instructed the Monetary Instances.
Merz earlier this week criticised the fee for main “too difficult” negotiations and mentioned a deal ought to concentrate on 4 to 5 key industries, together with automotive, metal and prescribed drugs, the place Trump has already threatened sectoral tariffs.
However fee officers say these are the toughest to take away as a result of Trump desires to reshore these industries within the US and scale back imports.
EU negotiators consider that vehicles are “the toughest aspect” of any cope with the White Home and should be dealt with after simpler points have been agreed first to construct belief, the folks mentioned.
Berlin was “delusional” to consider Trump would comply with concessions for German automakers as a primary step, one of many officers mentioned.
The disconnect between the EU govt and the bloc’s largest economic system got here to fore at a leaders’ summit in Brussels on Thursday, the place they had been set to debate the US commerce relationship. Fee officers had been hoping leaders would again a “credible risk” of retaliation to get the deal finished by a July deadline.
“I help the Fee to rapidly come to a commerce cope with the US,” Merz mentioned as he arrived on the summit.
Trump has threatened 50 per cent “reciprocal” tariffs on EU imports if no deal is struck by July 9.
In the meantime so-called sectoral tariffs of 25 per cent for vehicles and automobile components, and 50 per cent for metal and aluminium, are nonetheless in place — and so is a ten per cent tariff on most different imports.
A number of international locations are cautious of constructing too many concessions to get a fast deal. Referring to the UK-US settlement, one senior EU diplomat mentioned that the bloc “ought to nonetheless hope that the EU with its 450mn folks would have extra commerce energy than the UK”.
A UK-style carve-out could be difficult for the sector if it entails a quota system. Trump agreed to chop a 27.5 per cent tariff on British vehicles to 10 per cent for the primary 100,000 automobiles shipped from the UK. The same deal for the EU would go away member states combating over the allocation of the quota.
One other senior EU diplomat mentioned that “the mandate we gave to the fee . . . was to go to the bottom tariffs potential”. They added that “10 per cent will not be the mandate we gave,” referring to the UK, which accepted the ten per cent levy on most items to stay in place.
If the deal is “not balanced”, the diplomat mentioned, the EU could be “able to implement” counter tariffs.
The bloc has already agreed however suspended the applying of retaliatory tariffs on €21bn of US items and is getting ready an extra bundle focusing on €95bn value of American merchandise.
Germany’s economic system relies on exports and has been hit notably arduous by the tariffs. ACEA, the automobile trade physique, mentioned that carmakers had been dropping “single-digit tens of millions” per day consequently. The German automobile trade accounts for about 5 per cent of the nation’s GDP.
The US is the second-largest marketplace for EU automobile exports after the UK. In 2024, greater than 750,000 vehicles had been exported, valued at €38.9bn. The US exported 169,000 to the EU of €7.8bn worth, based on ACEA.
Amongst German carmakers, BMW is especially bullish that the US slashes its 25 per cent tariff from July. BMW chief govt Oliver Zipse instructed buyers in mid-Might that the corporate was capable of negotiate with the Trump administration from a place of “energy” as the biggest US automotive exporter by worth final 12 months, delivery 225,000 automobiles value greater than $10bn, from its plant in Spartanburg.
BMW, Mercedes-Benz and different European carmakers have pushed the US to permit an obligation downside programme, which might assist them get refunds on import tariffs if they’re additionally exporting automobiles from America.
Senior executives from the highest three German carmakers met Trump on the White Home in mid-April. Merz additionally broached the automobile subject with Trump after they met within the Oval Workplace earlier this month.
“I mentioned that I drive an American automobile with a German model,” Merz mentioned after the assembly, by means of explaining to the US president that many German carmakers together with BMW produced automobiles within the US earlier than exporting them again to Europe.
Whereas Merz has pressed the EU to achieve a cope with the US as quickly as potential, some German carmakers are much less optimistic. “It’s a combined bag for the time being,” one automotive official mentioned. “On the finish of the day, it’s the EU that’s negotiating with the US.”
One other individual at a German carmaker mentioned: “Negotiations appear to be a bit caught. It’s irritating . . . that the EU is letting time move.”
